The new radicals: a better approach to wealth technology

By Russ Bryan | 9 December 2019

The wealth industry has never found it easy to implement systems and adapt to new technologies. One reason for this is that there is a cultural divide between people who work in IT and people who manage money. That gap is reducing but nevertheless it remains. Compounding the issue, the technology landscape is now changing faster than ever and wealth firms have more and more options.

In the past wealth managers had numerous systems that operated from point-to-point; then we entered the time of STP and workflow; and we are now in the era of APIs and plug-ins. There are a plethora of API providers and it is becoming increasingly difficult for a wealth manager to know which ones to choose.

Additionally, for most wealth managers, the lion’s share of their available IT investment is taken up by compliance and risk. One regulation follows another in a seemingly endless cycle, and all will have an impact on systems and people costs. In terms of risk, wealth managers need to consider portfolio risk, client risk and the growing risk of fraud and cybersecurity. These two elements severely limit the budget remaining for expansion or improvements to the business.

Within the IT systems themselves, there is also an inherent risk. There have been some major IT failures of late and the cost of those to the wealth management industry (in terms of write-downs) will have run into the hundreds of millions. One reason for this is that traditionally, the aim of most software firms was to go into a wealth manager independently and sell their own software, not concerning themselves with how it integrated with that wealth manager’s other applications.

Furthermore, the industry is moving away from waterfall to agile development; it’s moving from installations to cloud deployment; and data is now acknowledged as the key commodity.

Building ecosystems

As a consequence of these factors, I believe that wealth managers now need a radical new approach to technology to help them make the right choices. An increasingly important option will be a shift towards building ecosystems and partnerships within wealthtech.

One might argue that partnerships are not new: APIs and integration have been around in the wealth industry for some time. The landscape, however, has altered radically in recent years as the pace of business, regulatory and technology change has intensified. And let me be clear: simply integrating technologies through APIs is not an association; that is just creating a technical interface - a requirement without which no wealth manager in its right mind would buy any solution.

Real partnerships operate at a business level between two or several firms, where the vendors work together to collectively understand the particular client that they are approaching, identify the business problems that their respective solutions are solving (pinpointing any ‘gaps’) and architect a combined solution to the client’s dilemma.

This kind of on-the-fly partnership requires a good cultural fit, transparency and excellent communication between the vendors, but also a similar approach to processes and project management. Crucially, it necessitates an effective data governance structure that all parties sign up to.

Of course, the best integrations are served through long-term partnerships, where Service Level Agreements dictate that the various providers involved must provide compatibility out-of-the-box.

Practical steps

At the pre-sale stage there is certainly much co-operation that could be achieved, but it appears that very few vendors are actually attempting this. A collaborative proof of concept between several vendors, for example, could be a useful approach that would benefit the wealth manager and vendors alike.

One step towards this nirvana would be for vendors to begin to admit that their software is not always the panacea for all problems and recognise that other vendors may have functionality that they do not have. Honesty is the key here: the distrust that many wealth managers have of the software industry is the preponderance of vendors that make unsubstantiated claims about what their kit can and can’t do. Additionally, rapidly creating bespoke functionality in areas which are not in the vendor’s ‘sweet spot’ as a means of seeing off the competition is rarely in the client’s best interests.

Indeed, most wealth managers would agree that no single provider can do everything well, so the ability to choose from a range of best-of-breed technology vendors enables firms to meet their specific business requirements and build their own, unique technology environment that brings value to their business.

Of course, many wealth firms are growing by acquisition at present and firms need to deliver a consistent client experience, irrespective of the back-office systems the acquired firm is operating. During such corporate transactions there can be a big opportunity for more cooperation between vendors, utilising APIs to plug in multiple technologies. There is no need for the headache and risk of a massive data merge project to bring everything into a single system.

It’s important to note that integration doesn't end when the systems go live. The ongoing management of that integration is critical and one of the key challenges of using multiple vendors is that the client’s data is passing from system to system. There needs to be a support process for the integration itself, not just each individual system - highlighting any errors or warnings.

The data headache

When a wealth manager is integrating a front office with a back office, there could be literally hundreds of data interfaces. Data management is one of the biggest sources of risk, so the data integration process must be well managed and monitored.

On this theme, one of the biggest challenges faced is the regulatory view on outsourcing. Data governance and data lineage are key here, as the regulator can request reams of documentation from a wealth manager to prove that it is in control. A team of vendors that is able to demonstrate this data governance as a collective partnership would certainly help win hearts and minds among potential clients.


Many wealth managers are struggling to keep up with the pace of change. That pace is being driven by not just technological advances but also evolving regulatory and client needs. We are living in an era where wealth managers may be serving five generations, which is completely unprecedented.

There is now a multitude of specialist and enterprise applications covering the front, middle and back offices. With data analytics rapidly becoming the ‘new oil’ and emerging technologies such as AI, it is becoming increasingly difficult for wealth managers to make the right choices for investing in their technology.

As a consequence, we are now witnessing the emergence of vendor partnerships. While still in its infancy, this new era does provide an opportunity to overcome some of the challenges that wealth managers face and to optimise some of the strengths of best-of-breed providers.

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